Rand slips to worse than R14.15/$ after warning by Moody’s
The rand was weaker on Friday morning, breaking through R14.15 against the dollar, after credit ratings agency Moody’s Investors Service warned that the R59bn bailout for Eskom was credit negative for SA.
Moody’s, the only major ratings agency that has not downgraded SA to sub-investment grade, said in a statement on Thursday that the government would struggle to absorb the cost of funding the troubled power utility.
Earlier this week, finance minister Tito Mboweni announced plans of a R59bn bailout for Eskom over the next two years under the special appropriation bill. The minister said that due to the possibility of lower tax revenue, the government may need to increase its borrowing requirements for the 2019/2020 financial year.
Moody’s said the lack of a turnaround strategy for Eskom to be more financially stable “exacerbates” the problem of the government.
“If one looks at their comments recently though, they do seem to be talking themselves into a position to move SA to a negative watch come November 1,” Standard Bank currency trader Warrick Butler said in a note.
“The delay in restructuring Eskom has to be testing their patience and the proverbial can has pretty much been kicked as far as it can go. I can’t imagine there is more room to manoeuvre anymore,” Butler said.
At 09.55am, the rand had weakened 0.58% to R14.1743/$, 0.46% to R15.7832/€ and 0.35% to R17.6176/£. The euro had weakened to $1.1135.
Gold had gained 0.35% to $1,419.13/oz while platinum had fallen 0.32% to $865.08. Brent crude earlier gained 0.56% to $63.41 a barrel.
The benchmark government 10-year bond was weaker, with its yield rising 8.5 basis points to 8.255%. Bonds yields move inversely to bond prices.
Source: businesslive.co.za